For a secure post-retirement life

K. Nitya Kalyani

IN THE last two articles, we discussed some plans to make life post-retirement easy and pleasant. Assuring a regular income by purchasing a pension plan was one.

The Life Insurance Corporation of India (LIC) has just revamped its individual pension policies, or annuities as it calls them. Jeevan Dhara and Jeevan Akshay were withdrawn from July 1 and reintroduced in a new avatar.

The yields were adjusted downwards at 11 per cent to be in line with the reduced Public Provident Fund rates, and a few parameters were made more flexible for younger people to use the scheme.

Jeevan Suraksha has been left unaltered, while other annuity schemes, such as the Deferred Annuity and the Immediate Annuity, have been scrapped.

There is a lot to be said about buying a pension to fund your retirement. What one must surely avoid is relying on one source for all income requirements. It is better to use the PPF loan, invest in a house and save on tax earlier. And by all means some pension plan must be made. Jeevan Suraksha carries a pretty attractive tax benefit though its return is not exactly the best.

There is a tendency to be drawn towards risky investments as one approaches retirement. But, unfortunately, bad planning is not, under any circumstances, better than no planning. This is the kind of last-minute desperation that leads people to dubious IPOs and nidhis in which they put their hard-earned money. Had they invested in time and wisely, they would not have thrown good money after the get-rich-quick schemes.

Now the investment scene has vastly improved with mutual funds offering pension plans. Kothari Pioneer's pension plan is popular, and one more way to build up retirement income. But this is a completely different area from the LIC policies and PPF accounts, and requires caution.

One major post-retirement concern is the expenditure on health care, which will, probably, be the single largest expenditure. Quite a few health insurance schemes are available. The General Insurance Corporation subsidiaries have a small but neat portfolio of hospitalisation schemes for various requirements. The most popular is the regular Mediclaim policy which, perhaps, many of us already have. For a very reasonable premium, it takes care of major hospitalisation expenses that a retiree and his family may face.

Adding to the benefits of this would be the Personal Accident policy. This is benefit-oriented that will pay the sum assured whether or not it constitutes one's expenses. It covers death and disability due to any accident and even provides weekly payments, in case of a temporary period of total disability.

The Jana Personal Accident policy comes with the convenience of longer periods of policy coverage (up to five years).

Mediclaim and one of the other two are necessary for anyone looking at protection from major expenses relating to accidental injury or health problems.

Major diseases and surgeries are covered by LIC's illness policies such as Asha Deep II and Jeevan Asha II. Should one face any of the covered perils, a lumpsum combined with a periodical payment will be given. This will be linked to the policy amount and not in any way to any expenditure one may incur due to that disease, its treatment or surgery.

There are other good policies too. One is the long-term Mediclaim which offers the added convenience of purchasing the regular Mediclaim cover for a longer period. There are no worries of missing the renewal dates. However, the premium under this policy bears no tax benefit. Mediclaim premiums, for instance, can be deducted from the taxable income up to Rs. 15,000 a year, under section 80D of the Income Tax Act.

While the long-term Mediclaim gives current protection, one should be looking at the long-term retirement Mediclaim policy too. This policy is like a pension _ one buys it now but the benefits come later. This policy allows a host of other benefits other than just `pay now, be protected later'. It covers existing diseases and also lets one pay at a time when one is earning to take care of oneself later.

The policy is an improvement over the Bhavishya Arogya introduced some time ago, but had some restrictions over the age of entry. There are some schemes from the Unit Trust of India too that link medical expenses at retirement and units of course!

Another policy one could seriously consider is the Tertiary Care policy from the GIC companies. This is not specifically related to retirement in terms of time frame, but its benefits could just as well have been tailored for it!

The policy is meant for taking care of hospitalisation expenses for major ailments such as nephritis, renal failure, cerebral or vascular strokes, and open and close heart surgery. Typically, these are diseases that strike after middle age and can be devastating psychologically and monetarily if it happens in old age. Some of these newly-introduced policies have also shed the tax break induced austerity of Mediclaim, for instance. They provide cover for the expenses involved in an organ transplant, for instance.

Expenses relating to attendants during an illness have also been provided for under these policies.

With insurance liberalisation just around the corner, it could also make sense to learn about the new products on offer. Market-related investments such as mutual funds tuned for the retirement market, will be discussed in the next part of this series.

(The author is a Chennai-based financial journalist. Feedback may be addressed to the author at bleditor@thehindu.co.in.)

This article is the third in the series on pension schemes. The previous two articles appeared on June 4 and July 2.